Markets Short on Shorting China Stocks

A new scheme allowing global investors to short sell mainland Chinese stocks via the Hong Kong market has failed to attract a single order on its first day of operation, following criticism of the limitations it places on trading.

The new short-selling facility, announced by bourse operator Hong Kong Exchanges & Clearing a week ago, allows foreigners to try to profit from price falls in individual Chinese stocks for the first time, using the three-month-old equity trading link with Shanghai.

However, analysts have been quick to focus on the shortcomings of the scheme. Under the rules, a maximum of 1 per cent of available shares can be sold short by foreign investors per day, up to a total of 5 per cent over 10 days — restrictions that some say defeat the point of allowing shorting altogether.


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